The Bangladesh Bank is waiting for the interim government to bring a Payment and Settlement System Act, 2024 into effect, as it intends to take legal action against mobile financial service (MFS) provider Nagad Ltd over alleged irregularities.

Nagad introduced itself as a financial arm of the Bangladesh Post Office when it entered the market in 2019. It is still running on a temporary licence from the central bank.

After the interim government came into office, the central bank in August appointed an administrator at Nagad over the alleged irregularities in operations and dealings.

It said the appointment was made under section 31 of the act, which was passed in parliament in July this year.

However, sub-section 3 of section 01 says the act would come into effect on a date announced through a gazette. It is yet to be issued.

"We informed the matter to the government and the division concerned will issue a gazette soon by fixing the effective date," one central bank official, who is directly involved in the process, told The Daily Star.

Without the gazette, questions will arise regarding the administrator's appointment, he pointed out.

The Daily Star has learned that the gazette would be issued stating that the act would take retrospective effect.

There are options to take the legal steps under the Payment and Settlement System Regulation, 2008 and the Bangladesh Mobile Financial Services (MFS) Regulation, 2022, said central bank officials.

But the latest act is more precise when ensuring legal measures, they said.

A director of Nagad filed a writ petition with the High Court on September 10 challenging the administrator's appointment for not complying with the act.

The High Court last week imposed a two-week status quo on all activities of Nagad, preventing the administrator and management board from taking any new step beyond regular business operations.

ALLEGED IRREGULARITIES AT NAGAD

The Daily Star came to know that the administrator found a lot of alleged irregularities at Nagad.

One was a deficit of Tk 600 crore, which came about through the creation of e-money that did not exist in cash. This is a major crime in the financial sector, as per industry insiders.

In another instance, there have been unauthorised withdrawals of around Tk 1,711 crore in total over the years through 41 distribution accounts which are designated for government allowances.

The administrator team informed the director general of the Directorate of Posts.

The administrator recommended legal action against the Nagad officials involved in the irregularities.

Nagad CEO Tanvir A Mishuk and some of its senior officials have not been coming to office since the administrator's appointment.

BB FORENSIC AUDIT

The central bank is going to appoint auditors to conduct a forensic audit of Nagad's previous operations alongside a regular audit for fiscal year 2023-24.

A forensic audit is an examination and evaluation of a firm's or individual's financial records, through which evidence is derived to be used in a court of law or legal proceeding.

Last month the banking regulator brought out newspaper advertisements inviting foreign auditors to take part in a tender.